With unit trusts, NAV relates to the price you pay when you invest in the fund.

But with ETFs, which are listed on the stock market, the market determines the share price. This means the share price can trade either at a premium or a discount to NAV.

With ETFs, you usually find that the share price is usually close to the NAV. This is down to institutional investors trading directly with the manager of the ETF, which keeps the price in line, explain the experts at Money Week.

But during times of extreme market volatility, this link can break. This means that ETFs can trade for short times at premiums or discounts to their NAVs.

So there you have it. The link between NAV and the price you pay to invest in funds.

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